RE: Cause for concern12 Jan 2019 18:04
Cont
The prevailing wisdom is that sterling could rise significantly during 2019, as and when Brexit uncertainty is dispelled. In trade-
Sterling hit lows of $1.25 last month, as Theresa May postponed the “meaningful vote” on her Withdrawal Agreement and Parliament went into meltdown. Yet the long-term fundamentals suggest the UK currency should be stronger, against both the dollar and euro.
The pound will stay shackled to Brexit-related politics at the very least until the end of March – when we’ll leave the EU either under Theresa May’s deal, an improved deal following EU concessions or “no deal”. That’s unless Article 50 is extended – in which case, all bets are off.
The now openly anti-Brexit faction across Britain’s political class – “I respect the referendum result, but …” was always disingenuous nonsense – could force the Government to stage a second referendum.
That would take time – meaning, again, Article 50 will need extending, something Brussels will no doubt miraculously engineer if it increases the chance of the UK (and our massive annual contributions) remaining in the EU.
Alternatively, of course, May’s ramshackle administration could fall, leading to a general election – and further months of chaos. It could well be a long time, then, before Brexit uncertainty dissipates and economic fundamentals returns as the main driver of our national currency. Until then, sterling predictions are largely political guesswork.
Liam H Tele